Short Range Outlook : May 2019

A balance has been maintained between supply and demand in the global long steel products market, but it is still difficult to transact business globally. However, shorter-distance regional business is good. The global market can be described as mostly unstable, with only a few exceptions.

Absence of Chinese still provides support for the rest of the world

We have to take into consideration that China has been largely absent from dictating the global steel market since the end of 2015. Chinese domestic demand, from which Chinese steel producers are making money, is suppporting the rest of the world. Local production is increasing almost everywhere. The traditional importers of the past have become exporters – the UAE and Qatar, for example, just to name a couple.

US domestic mills reap the rewards of protectionism

In the US, prices did come down some, reflecting the movement of scrap prices. Since all domestic prices are below logical import prices with the Section 232 duties added, imports without special exemptions are not working out. There are not any exemptions for reinforcing bar and wire rod imports. There is talk in the White House of spending a trillion dollars on infrastructure, but no word on where the money will come from. It, therefore, may take a long time for this to become a reality, even for half of the discussed amount. When it does happen, the windfall will be for domestic mills – who disclosed mega earnings for the last quarter without such projects – as almost all such projects will be subject to a “Buy American” clause.

Demand in Europe not brilliant but stable

The market has been quiet in Europe due to the Easter holidays and the general market situation in the region has not changed. Safeguard measures help maintain the equilibrium between supply and demand, with the latter not brilliant but stable. Lately, we see that EU producers are active in the export markets in order to ease domestic pressure. However, it is not possible for European exporters to match the prices in the markets which not affected by protectionist measures.

Turkey is the country most impacted by protectionist measures

In other places around the world, domestic business is still moderate, though exports are under pressure due to trade remedies. Turkey is the most affected among all countries, with a 15 percent drop in liquid steel output and a drop of almost 50 percent in rebar production. The prevaling protectionist measures do not allow Turkish exporters to reach their main export markets. The latest news is that Malaysia has also decided to pursue an antidumping case.

Turkish rebar exporters to be further impacted by EU quotas issue

Turkish rebar exporters could use the import quota allocated by the EU to “other countries” for the last 90 days of the first half of this year; however, the next quota period will run for 360 days, while the quota allocated to “other countries” will not be made available to Turkish exporters until the last 90 days of this period. That will certainly have a further impact on Turkish rebar exports.

The spring period is driving steel production and demand for raw materials in Europe and the US. However, reduced Turkish domestic steel demand is putting pressure on ferrous scrap.

Strength of Chinese domestic demand remains of critical importance

It is highly critical that the production and consumption figures in China are all up, and likewise prices. Chinese domestic demand remains strong, which reduces China’s steel exports. However, it is of the utmost importance that the Chinese domestic market should keep internal demand active and continue consuming steel at the same speed in order to prevent a flood of exports arriving into the global market. In particular, the Chinese being largely absent from the export markets allows other countries like Qatar and Turkey to stay in the Asian markets.

Regionalization of steel trade is a positive factor for pricing

The regionalization of trade is positive for pricing despite the obvious problems of protectionism for the consumers. It also poses a challenge for Turkish steel producers when the Turkish domestic economy is contracting.

Competition heats up in limited export markets

The competition in the market is getting stronger due to limited export markets, and as new cases of antidumping appear. Turkish exporters are competing with everyone in the markets which are still reachable for them. On the other hand, it is difficult to compete from long distance and then safeguards and tariffs do the rest.

Outlook worsens and fears of economic slowdown gain ground

Demand is still good but the outlook is worsening in line with general international sentiment and unpredictability regarding new trade wars and measures. The US market is losing steam and so is the scrap market.With a steel asset build-up in multiple areas, the scope for large-scale international trade may be affected in the longer term. Fears of an economic slowdown are gaining acceptance and risks of continued trade barriers restrict the outlook.